Indonesia:
Recent Corporate Governance Reform In Indonesia

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Indonesia is taking significant steps toward improving corporate
governance. The lessons learnt from the Asian financial crisis of
1997-98 and the global financial crisis of 2007 were critical in
initiating these reforms while the desire to establish a strong
corporate governance environment in the country in time for the
planned launch of the ASEAN Economic Community by 2015 is
sustaining momentum.

The reforms are articulated in the Indonesian Corporate
Governance Roadmap ("Roadmap") which was launched in
early 2014 by the Indonesia Financial Services Authority (Otoritas
Jasa Keuangan / "OJK" previously the Capital Market
Supervisory Board / Badan Pengawas Pasar Modal –
"Bapepam") with the support of the World Bank's
International Finance Corporation (IFC).

The broad outcomes which the Roadmap seeks to achieve are the
strengthened supervisory role of company boards, the improved
quality of disclosure by companies / increased company
transparency, and greater protections for shareholders and
stakeholders.

The following regulations are some of the recently enacted
regulations as part of the reform program:

OJK Regulation No. 33/ POJK.04/2014
on the Board of Directors ("BOD") and Board of
Commissioners ("BOC") of the Issuer or Publicly Listed
Company ("Reg 33/2014") which replaces the Decision of
the Head of Bapepam No. Kep-45/ PM/2004 ("Rule
IX.I.6");

Regulation No. 34/POJK.04/2014 on the
Nomination and Remuneration Committee of the Issuer or Publicly
Listed Company ("Reg 34/2014") which is a new regulation;
and

OJK Regulation No. 35/ POJK.04/2014
on the Corporate Secretary of the Issuer or Publicly Listed Company
("Reg 35/2014") which replaces the Decision of the Head
of Bapepam No. Kep- 63/PM/1996 ("Rule IX.I.4").

BOD and BOC

1. Requirements for the BOD and BOC

In the five (5) years prior to their
appointment and during their tenure, the members of the BOD and BOC
must not have been a member of a BOD and/or BOC which:

failed to hold an annual General
Meeting of Shareholders ("GMS");

had an accountability report rejected
by GMS or failed to submit an accountability report to GMS;
and

caused a company with a license,
approval, or registration from OJK, to fail to submit its annual
report and/or financial report to OJK.

Each member of the BOD and BOC has a
commitment to comply with the laws and has the knowledge and/or
ability in the needed field of the Issuer or Public Company.

2. Numbers of the BOD and BOC

The minimum number of each BOD and BOC is two (2) persons
– one (1) member of the BOD must be appointed as the
President Director, and one (1) member of the BOC must be appointed
as an Independent Commissioner.

If the BOC consists of more than two (2) members, the
Independent Commissioner must be at least thirty percent (30%) of
the BOC's total members, and one (1) of them is to be appointed
as President Commissioner.

3. Independent Commissioner

An Independent Commissioner:

must not have worked or had an
authority and responsibility to plan, lead, control or supervise
the Issuer and Public Company in the six (6) months prior, unless
it was for the reappointment as Independent Commissioner of the
Issuer or Public Company for the next period;

must not hold a share, directly or
indirectly, in such Issuer or Public Company;

must not have an affiliation
relationship with the Issuer or Public Company, the BOD, BOC, or
principal Shareholders of such Issuer or Public Company; and

must not have a direct or indirect
business relationship which is related to the business activity of
the Issuer or Public Company.

An Independent Commissioner who has been appointed for two
periods may be re-appointed for the next period to the extent that
he/she declares to the GMS that he/she is still independent.

4. Number of Permitted BOD and BOC Positions

A BOD member may be a member of one (1) other BOD, a member of
three (3) BOC and/or a member of five (5) committees in other
Issuers or Public Companies.

A BOC member may be a member of the BOD and/or BOC in two (2)
other Issuers or Public Companies.

5. BOD and BOC meetings

The minutes of BOD meetings must be signed by all attending
board members and must be delivered to all board members. This
requirement also applies to BOC members in relation to BOC
meetings.

Should the BOD and BOC hold joint meetings, the minutes must be
signed by all attending members of the two boards and must be
delivered to all members of both boards.

6. Resignation of BOD and BOC Members

Resignation of BOD and BOC members must be resolved through the
GMS within ninety (90) days after the Issuer or Public Company
receives the request of resignation.

7. Guidelines and Ethic Codes

Reg 33/2014 provides new obligations for the BOD and BOC to
prepare guidelines and ethic codes which bind every member of the
boards.

The guidelines and ethics codes are to cover, among others, the
legal basis, job description, value, working hours, principle of
implementation of the work, and the professional attitude of the
members of the BOD and BOC, employees or supporting organs of the
Issuer and Public Company.

8. Prohibitions on BOD and BOC

Previously, BOD and BOC members could not disclose untrue
statements on material facts and were required to disclose material
facts which could avoid misleading conditions of the Issuer or
Public Company.

Reg 33/2014 replaces this with a provision stating that BOD and
BOC members are prohibited from making any personal gains directly
or indirectly from the activities of the relevant Issuer or Public
Company, except for income which has been approved by the GMS.

Committee

Reg 34/2012 requires the Issuer and Public Company to have a
nomination and remuneration function which is to be performed by
the BOC through a Nomination and Remuneration Committee
("Committee").

1. Nomination Function

In relation to its nomination function, the Committee has the
following duties and responsibilities:

provide recommendations to the BOC on
the composition and members of the BOD, policies and criteria for
the nomination process, and the policies on performance evaluation
for BOD and/or BOC members;

assist the BOC to evaluate the
performance of BOD and/or BOC members;

provide recommendations to the BOC on
the capacity development program for BOD and/BOC members;

provide recommendations to the BOC on
candidates who meet the requirement to become a member of BOD
and/or BOC and can be submitted to the GMS.

2. Remuneration Function

The duties and responsibilities of the Committee for the
remuneration function are as follows:

provide recommendations to the BOC
regarding the remuneration structure, remuneration policies, and
the amount of the remuneration;

assist the BOC to evaluate the
performance of BOD and/or BOC members according to the remuneration
received by the members.

3. Membership

The minimum number of Committee members is three (3) persons.
One of them must be the chair who must also be an Independent
Commissioner, while the others can be:

a BOC member;

a person outside of the relevant
Issuer and Public Company; or

a person who holds a managerial
position under the Director of human resources.

The members of the Committee are appointed and discharged based
on the resolution of the BOC's meeting.

The tenure of the members of the Committee must not be longer
than the BOC's tenure, as stipulated under the company's
articles of association.

4. The Committee's Meeting

The Committee's meeting is held at least once every four (4)
months, and must be attended by the majority of its members. One of
the members present must be the chair.

5. Other Obligations for the Committee

Other obligations of the Committee include:

to record the result of the
Committee's meeting in minutes which must be documented by the
Issuer or Public Company;

to prepare binding guidelines for the
Committee, which will be approved by the BOC, regarding the
Committee's duty and responsibility, composition and
membership, procedure, meeting, report, member replacement, and
period of membership;

to report the implementation of the
Committee's duty, responsibility, and the nomination and
remuneration's procedure to the BOC.

6. Prohibition for the Committee

The Committee is prohibited from making any personal gains
directly or indirectly from activities of the relevant Issuer or
Public Company, except for legal income.

Corporate Secretary

1. Corporate Secretary's duties

Reg 35/2014 provides new duties for a Corporate Secretary, i.e.
he/she has to assist the BOD and BOC to implement good corporate
governance, including the disclosure of information to the public,
submission of report to the OJK in a punctual manner and etc.

2. Corporate Secretary's Requirements

The Corporate Secretary must fulfill the following requirements
while holding the position:

competent to conduct legal
action;

have knowledge and comprehension in
the fields of legal, finance and good corporate governance;

good communication skills;

domiciled in Indonesia.

3. Appointment and Discharge of the Corporate
Secretary

The Corporate Secretary function is performed by a person or
work unit that is appointed and discharged by the BOD's
resolution.

4. Number of Double Positions of the Corporate
Secretary

The Corporate Secretary can be a Director as well. However, the
Corporate Secretary is prohibited to hold any other position in
another Issuer or Public Company.

5. Absence of the Corporate Secretary

In the absence of the Corporate Secretary, a Director or other
person appointed as the temporary Corporate Secretary holds the
Corporate Secretary's function without prejudice to the
Corporate Secretary's requirements.

The Issuer or Public Company must appoint a replacement within
sixty (60) calendar days after the Corporate Secretary's
position becomes vacant.

6. Other Provisions

Reg 35/2014 adds new obligations in
relation to publication on the Issuer and Public Company's
website, such as, the availability of information on the website,
and the publication on the website of the appointment or
resignation of the Corporate Secretary.

The Corporate Secretary must
participate in education or training to improve his/her knowledge
and comprehension.

The Corporate Secretary must maintain
the documents, data and information confidentially unless otherwise
required by laws.

Information which is provided by the
Corporate Secretary to be made public is official information from
the relevant Issuer or Public Company.

Sanction from the OJK

Sanctions will be imposed for those who violate these OJK
Regulations (Reg 33/2014, Reg 34/2014 and Reg 35/2015). The
sanctions include:

warning letter;

fines,

limitation of business
activities;

freezing of business activities;

revocation of business licenses;

cancellation of approval; and

cancellation of registration.

Enforcement of the OJK Regulations

An Issuer and Public Company must comply and adjust its existing
conditions in accordance with Reg 33/2014 and Reg 34/2014 within a
year after its enactment. While for Reg 35/2014, the Issuer and
Public Company must comply within six (6) months after its
enactment.

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